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Oct. 27, 2015, 11:47 AM
- IBM (IBM -1.1%) has hiked its buyback authorization by $4B to $6.4B. That's good for repurchasing 4.6% of shares at current levels. $5B was added to IBM's buyback a year ago.
- Big Blue has also declared its regular quarterly dividend of $1.30/share (3.6% yield). The next dividend is payable on Dec. 10 to stockholders on record as of Nov. 10.
- IBM spent $1.5B on buybacks in Q3. The latest hike comes after shares fell to 5-year lows in the wake of IBM's mixed Q3 results and 2015 guidance cut.
Oct. 20, 2015, 1:04 PM
- IBM (IBM -5.8%) is at its lowest levels since 2010 after providing a 2015 EPS guidance cut to go with mixed Q3 results, and reporting continued top-line pressures in many key businesses. A slew of firms have cut their targets, but none have downgraded.
- On the earnings call (transcript), CFO Martin Schroeter stated Q3 sales were pressured by a longer-than-expected "transformation" timeframe for Global Business Services (GBS) "as the market shifts away from some of the more traditional application areas" (due to cloud adoption?), as well as weak storage demand amid growing industry adoption of flash arrays - that's potentially a positive for newly-public flash array vendor/IBM rival Pure Storage (PSTG +2.4%).
- Schroeter also mentioned transactional software revenue weakened towards the end of Q3, and that both GBS and transactional challenges will weigh on Q4. GBS revenue fell 13% Y/Y in Q3, storage revenue 19%, and software revenue 10%. Excluding forex, the declines were 5%, 14%, and 3% (suggestive of moderate share loss). Software accounted for 43% of IBM's Q3 op. profit.
- Stifel's David Grossman (Buy, target cut by $20 to $160): "We wonder whether the significant downward revision to guidance reflects an attempt to reset the bar for next year ... We have lowered our 2015 EPS from $15.71 to $14.75 (consensus was $15.67) and 2016 from $16.36 to $15.30 (consensus $16.04), which assumes flattish revenue growth in 2016 (versus down ~1% in 2015) and pretax margin expansion of 60bp (versus down 100bp in 2015). It will be difficult to grow [free cash flow] in 2016 on this EPS base, which suggests the stock could remain in a trading range of high $135-$145, pending the 4Q report."
- Bernstein's Toni Sacconaghi (Market Perform, target cut by $10 to $140) thinks 2016 could be even tougher than 2015, given a declining services backlog, the rolloff of currency hedges, a lack of a mainframe/Power system upgrade cycle, lower "non-operating gains," and ongoing strategic investments. He sees EPS dropping to $14.30 in 2016 - revised 2015 guidance is at $14.75-$15.75 - with cash flow "potentially declining more moderately than EPS."
- Prior IBM coverage, SA IBM earnings analysis
Oct. 19, 2015, 5:39 PM
Oct. 19, 2015, 4:36 PM
- Helping IBM beat Q3 EPS estimates in spite of a revenue miss: The company had a non-GAAP tax rate of 18%, up slightly from Q2's also depressed 17.2% but down from 20.8% a year ago.
- Also helping: 1) SG&A spend fell 10% Y/Y to $4.7B thanks to job cuts and forex, and R&D spend fell 5% to $1.3B. 2) Gross margin from continuing ops rose 80 bps Y/Y to 50%. 3) $1.5B was spent on buybacks.
- Free cash flow rose 18% Y/Y to $2.6B. However, IBM now expects 2015 FCF to be "relatively flat" compared with 2014's $12.4B. It guided in July for a "modest increase."
- Segment performance: Global Tech Services revenue -10% Y/Y to $7.9B; op. profit -22% to $1.3B. Global Business Services revenue -13% to $4.2B; op. profit -22% to $673M. Software revenue -10% to $5.1B; op. profit -19% to $1.9B. Hardware revenue (hurt by the x86 server unit sale) -39% to $1.5B; the business had a $24M op. loss. Global Financing revenue -8% to $447M; op. profit +18% to $562M. Forex had a 9% impact on total revenue growth, and the x86 sale a 4% impact.
- Geographic performance: Americas revenue -10% Y/Y to $9.1B. EMEA -16% to $6.1B. Asia-Pac -19% to $4.1B.
- Other details: 1) The quarter-ending services backlog fell by $4B Q/Q and $10B Y/Y to $118B. 2) Revenue from BRIC markets fell 30% Y/Y (7% exc. forex and the x86 sale). 3) Middleware revenue -7%, mainframes (boosted by upgrade cycle) +15%, Power systems -3%, storage -19% (share loss). 4) "Cloud delivered as a service" revenue" is on a $4.5B/year run rate, the same as Q2 and up from $3.1B a year ago. 5) Analytics revenue rose 9%, and total "strategic imperatives" revenue (cloud, security, analytics, mobile) 17%.
- IBM ended Q3 with $9.6B in cash and $13.7B in non-Global Financing debt.
- IBM -4% after hours to $143.24. Earnings call at 5PM ET (webcast).
- IBM's Q3 results/guidance cut, PR
Oct. 19, 2015, 4:07 PM
- International Business Machines (NYSE:IBM): Q3 EPS of $3.34 beats by $0.04.
- Revenue of $19.28B (-13.9% Y/Y) misses by $340M.
- Cuts 2015 EPS guidance to $14.75-$15.75 from prior $15.75-$16.50. Consensus is at $15.68.
- Shares -3.7% after hours.
Oct. 18, 2015, 5:35 PM
Oct. 15, 2015, 2:52 PM
- VMware (VMW +0.7%) is buying Boxer, a developer of enterprise e-mail/task management apps for iOS and Android, for an undisclosed sum.
- Boxer will be integrated with VMware's AirWatch enterprise mobility management platform (EMM - manages devices and apps). VMware exec Noah Wasmer: "The Boxer team ... has developed a mature personal information management (PIM) solution for enterprises that offers a container approach to mobile application management and security. Boxer ... supports market leading productivity, enterprise and social networking solutions including Box, Dropbox, Evernote, Facebook, Gmail ... Imagine, your apps and your data – seamlessly working together with one unified identity and NO logins or configurations – consumer simple, enterprise secure."
- For its part, EMM rival Microsoft has bought e-mail app developer Accompli (its products now underpin the Outlook mobile apps), calendar app maker Sunrise, and to-do list app maker 6Wunderkinder.
- Separately, VMware and IBM have announced a partnership to make it easier to move workloads running on VMware's vSphere server virtualization platform to IBM's SoftLayer public cloud infrastructure. VMware's NSX network virtualization/SDN software can be used to enable the global migration of live workloads, and its VSAN storage virtualization software to provide integrated storage management. VMware and IBM have common cloud rivals in Amazon and Microsoft.
Oct. 13, 2015, 7:56 AM
- Etihad Airways and IBM (NYSE:IBM) have signed an information technology deal worth $700M over 10 years that aims to improve the airline's booking systems and cut costs from its network operations.
- The agreement also includes customer data analytics and the development of technology that can predict weather patterns.
- IBM sealed a similar deal with Lufthansa last year, which the German airline said would generate cost savings of €70M a year.
Oct. 8, 2015, 12:21 PM
- A rumor that an activist investor (possibly ValueAct Capital) has taken a stake in IBM (IBM +1.2%) has led Big Blue's shares to catch a bid. The S&P is nearly flat, and the Nasdaq down 0.5%.
- Reuters reported in April IBM had hired banks to help defend it against potential activists, following attempts by disgruntled IBM shareholders to reach out to them. ValueAct and Pershing Square Capital were said to have turned the shareholders down.
- Many of Big Blue's actions in recent years - job cuts, large buybacks, the sale of non-core/underperforming business units - are straight out of the traditional activist playbook.
- Update: Some other IBM news: The company has rolled out single and dual-CPU Linux servers running on its Power CPUs, and supporting its OpenPOWER platform (allows Power servers to be developed by third parties). IBM has also announced a partnership with financial information giant Thomson Reuters (NYSE:TRI) to develop joint solutions that leverage the Watson A.I./cognitive computing platform for analytics and natural language-processing, among other things.
Oct. 5, 2015, 2:11 PM
- Acquisition-hungry IBM's (IBM +3.1%) latest target is Cleversafe, a provider of object storage systems and software. As usual, terms are undisclosed.
- Object storage, widely adopted and supported by cloud service providers (many enterprises also use it), requires less overhead for storing content such as documents, photos, and videos, and thus offers better scalability than traditional file and block-based storage systems; it's also easily accessible via HTTP. On the downside, it's less suitable for databases and other frequently-changing content. Amazon's S3 service (over 2T objects stored) is an example of a popular cloud object storage service.
- Cleversafe was founded in 2004, and has over 350 patents. Its platform uses proprietary software and algorithms to encrypt, distribute, and retrieve objects stored on commodity hardware, potentially across multiple locations. Clients include photo site Shutterfly and U.K. pay-TV provider Sky. EMC's Atmos object storage business is a rival.
- IBM's storage hardware revenue fell 10% Y/Y in Q2, and IDC estimates the company's external disk storage share fell to 11.1% from 12.1% a year earlier; both flash/hybrid storage upstarts and contract manufacturers selling to cloud providers have been gaining share. In February, IBM promised to invest over $1B in storage software over the next 5 years.
- Shares are rallying on a day the Nasdaq is up 1.4%, and the S&P 1.6%.
- Recent IBM acquisitions
Oct. 1, 2015, 2:54 PM
- IBM (IBM -1.3%) has launched Bluemix Local, a service for its Bluemix cloud app development platform (PaaS) that allows companies to build and run cloud apps behind their internal firewalls - useful for industries with strict data security/compliance policies - and thus enables hybrid clouds covering apps deployed both locally and on IBM's public cloud.
- Bluemix's rivals include Microsoft (Azure), Amazon, Salesforce (Heroku), and EMC/VMware's Pivotal unit; Microsoft has strongly emphasized Azure's hybrid cloud abilities. IBM recently updated Bluemix to provide better Java resource support, and has also rolled out a Bluemix-based service for mining Twitter data.
- Also: IBM has announced a $1B 10-year cloud services deal with Norwegian IT services provider EVRY. The deal includes cloud infrastructure services delivered by IBM's SoftLayer unit through a Norwegian data center.
- Meanwhile, IBM researchers state they've found an improved way to build transistors using carbon nanotubes - long an area of interest for the chip industry, as it looks for ways to prolong Moore's Law beyond this decade - instead of silicon. Big Blue thinks the advance, which involves a way to continue shrinking the width of metal wires connected to nanotubes without increasing electrical resistance, could eventually (likely at some point after 2020) reduce the contact point between wires and nanotube transistors to just 40 atoms in width, and 3 years after that 28 atoms.
Sep. 28, 2015, 4:45 PM
- IBM is buying Meteorix, a provider of consulting and implementation services for companies looking to deploy Workday's cloud HR and financials apps. Terms are undisclosed.
- "The planned acquisition of Meteorix can make IBM one of the leading, most qualified and experienced Workday service providers in the world," says an IBM exec. Workday, which has been taking share from on-premise software alternatives, has an FY16 (ends in January) revenue consensus of $1.16B, and an FY17 consensus of $1.59B. Its clients include a number of U.S. multinationals. Meteorix has 200+ Workday consultants.
- Big Blue had 2014 "cloud revenue" of $7B. However, that figure includes sales of hardware, software, and services used to enable cloud deployments, and which often came at the expense of on-premise sales. The company's "cloud delivered as a service" revenue was on a $4.5B/year run rate as of Q2.
- Recent IBM acquisitions: StrongLoop, Merge Healthcare, Blue Box
Sep. 21, 2015, 4:07 PM
- Though Bitcoin (COIN, OTCQB:BTCS) remains well off its 4-digit late-2013 highs - Coinbase currently shows Bitcoin selling for less than $229 - major enterprises continue throwing their weight behind the blockchain - the secure public ledger technology that underpins Bitcoin and other cryptocurrencies.
- IBM has been working on its own version of the blockchain, with plans to open-source the software when it's finished. Big Blue suggests its solution could be used to secure digital contracts, as well as drive transactions by allowing banks and others to share the same system of record.
- In March, Reuters reported IBM has held informal talks with central banks about a cash/payment system that uses the blockchain to drive transactions involving existing currencies, and doesn't require a bank or payment processor (thus lowering transaction fees).
- Meanwhile, JPMorgan, Goldman Sachs, UBS, RBS, and 5 other i-banks have announced plans to work with startup R3CEV to create standards for using the blockchain within the financial industry. RBS exec Kevin Hanley: "Right now, you’re seeing significant money and time being spent on exploration of these technologies in a fractured way that lacks the strategic, coordinated vision so critical to timely success. The R3 [blockchain] model is changing the game,"
Sep. 20, 2015, 11:03 AM
- HP (NYSE:HPQ) recently announced that it would cut around 30K jobs, but despite its size, the corporate layoffs are not the largest of the recent past.
- According to outplacement firm Challenger, Gray & Christmas, the following list can claim that distinction.
- IBM (NYSE:IBM) layoffs: 60K - July 1993
- Citigroup (NYSE:C) layoffs: 50K - November 2008
- Sears (NASDAQ:SHLD) layoffs: 50K - January 1993
- General Motors (NYSE:GM) layoffs: 47K - February 2009
- AT&T (NYSE:T) layoffs: 40K - January 1996
- Ford (NYSE:F) layoffs: 35K - January 2002
- Kmart (SHLD) layoffs: 35K - January 2003
- Circuit City layoffs: 34K - January 2009
- Boeing (NYSE:BA) layoffs: 31K -September 2001
- Bank of America (NYSE:BAC) layoffs: 30K - September 2011
Sep. 10, 2015, 12:05 PM
- Big Blue plans to integrate StrongLoop's products with its WebSphere middleware/app server line, as well as with its Bluemix cloud app development platform. IBM: "Combining StrongLoop's tools and services with IBM's WebSphere and Java capabilities, IBM will help clients bridge Java and Node.js development platforms ... Through integration on IBM Bluemix, these Java and Node.js communities will also have access today to many other IBM and third-party services including access to Mobile Services, data analytics and Watson."
- Back in March, IBM bought A.I./deep learning API provider AlchemyAPI. The company's middleware revenue (covers the WebSphere, Rational, and Tivoli lines, among other products) fell 7% Y/Y in Q2.
- Separately, IBM's Watson Health unit (launched in April) has announced partnerships with drugmaker Teva and healthcare R&D outsourcing firm ICON. Both tie-ups involve using the Watson Health Cloud analytics platform to derive insights from large volumes of healthcare-related data.
- Update: Some more Watson Health news: IBM has named Deborah DiSanzo, formerly the CEO of Philips Healthcare, Watson Health's general manager. Big Blue also says it's opening a Watson Health HQ in Cambridge, MA that will house 700+ employees.
Sep. 8, 2015, 11:55 AM
- "I've still got money left to buy," says Warren Buffett (BRK.A, BRK.B), appearing on CNBC. "I never go below $20B in cash."
- On the Fed: "I've never made a decision based on what the Fed is going to do or not do." However, he puts on his FOMC hat and says he wouldn't be very aggressive on rate hikes. The economy, Buffett says, is growing at a steady, but not booming rate.
- On IBM: He purchased more shares in Q3.
- On BAC: Buffett would vote in favor of CEO Brian Moynihan retaining the chairman role. He's done a "first-class job," says The Oracle.
International Business Machines Corp is an Information Technology (IT) company. It creates business value for clients and solves business problems through integrated solutions that leverage information technology & knowledge of business processes.
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